The capital's Liberals made the decision at their general meeting on Thursday evening.
The mayor told BNS after the meeting that neither he nor other members of the branch were planning to leave the Liberal Movement.
Šimašius was elected Vilnius' mayor in Lithuania's first-ever direct mayoral election in the spring of 2015 after defeating the incumbent, Artūras Zuokas of the Lithuanian Freedom Union (Liberals), in the run-off round.
The opposition Lithuanian Social Democratic Party (LSDP) has said it will nominate its leader, Gintautas Paluckas, and the ruling Lithuanian Farmers and Greens Union (LVŽS) is considering MP Tomas Tomilinas and MEP Antanas Guoga as potential candidates.
Zuokas has not yet officially confirmed his intention to run for the capital's top post.
Lithuania will hold municipal and mayoral elections next March.